Feds sue DC Solar lawyer in massive Ponzi scheme, alleging he deceived investors

Federal regulators sued a Walnut Creek lawyer Friday, alleging that he deceived investors and helped the now-convicted owners of DC Solar Solutions orchestrate one of the largest Ponzi schemes in the history of the region.

In a 22-page complaint filed in Sacramento federal court, the Securities and Exchange Commission alleges that attorney Ari J. Lauer engaged in fraud and aided and abetted DC Solar owners Jeffrey and Paulette Carpoff in their scheme.

“This case involves fraudulent securities offerings and a massive Ponzi scheme that raked in over $910 million in investor funds,” the SEC complaint says, referring to DC Solar’s practice of having investors buy mobile solar generators from the Benicia-based firm that were later leased out to offer huge tax incentives.

Federal prosecutors have said the whole deal was a scam, that DC Solar lied about the number of generators it actually produced and covered up the fact that it was selling items that didn’t actually exist.

“That was all a sham,” the SEC complaint says of DC Solar’s claims to investors. “In reality, thousands of the purportedly profitable generators were never even manufactured, let alone put into use, and the vast majority of alleged ‘revenue’ sent to investors came from investor money, not from actual lease payments from end-users of the generators.”

The complaint says that Lauer “advanced the scheme by lending the imprimatur of a lawyer to the operation” and earned “$4.4 million in ill-gotten gains” from January 2013 through December 2018.”

“Despite knowing that the lease revenue on which the investments depended was virtually non-existent, Lauer papered the transactions on behalf of DC Solar and materially misled investors about the true nature of the business and the amount of legitimate lease revenue,” the complaint alleges.

Lauer did not immediately respond Friday to a phone message and an email seeking comment.

The SEC filing is the latest legal twist in the DC Solar saga, which has seen five company officials sentenced to prison terms ranging from three years to 30 years. Two others await sentencing.

The SEC says Lauer, a Lafayette resident, was DC Solar’s outside counsel and “de facto general counsel” from 2009 through 2018 and participated in what one company official referred to as a “high wire act” intended to deceive investors.

In one case, the SEC complaint says, Lauer provided false financial information to a company that eventually invested $34 million, and subsequently Jeffrey Carpoff “wired $500,000 to Lauer as a reward for his part in successfully tricking” the company into handing over the money.

“Despite his awareness of the lack of lease revenue, Lauer continued to commit deceptive acts and assist others in committing deceptive acts throughout his tenure working for DC Solar,” the complaint says. “From the time he began working for DC Solar until the implosion of the fraudulent scheme, Lauer was the primary counsel for DC Solar in its dealings with investors.

“He drafted the deal documents for every investment contract that DC Solar sold, including the investment fund contracts, the sale leaseback contracts, and the underlying leases between DC Distribution and the end users of the generators.”

The audacious scheme enriched DC Solar officials, including Jeffrey Carpoff, a former auto mechanic who ended up using money from the scheme to buy a fleet of 150 exotic sports and antique cars, a collection of vacation homes that included a $5.3 million Caribbean villa, an interest in a Napa Valley winery and the Martinez Clippers baseball team.

Jeffrey Carpoff, 51, was sentenced in November 2021 to 30 years in prison — the maximum possible — and ordered to pay more than $790 million in restitution.

“You were selling air,” U.S. District Judge John A. Mendez told Carpoff at the time. “There was nothing there. You knew that.”

His wife, Paulette, 48, was sentenced in June to 11 years and three months.

Both are serving their sentences at federal prison facilities in Victorville.